QUOTES-BOJ Governor Ueda's comments at news conference

Sept 19 (Reuters) - The Bank of Japan kept interest rates steady on Friday but decided to start selling its holdings of risky assets, taking another step forward in phasing out remnants of its massive stimulus programme.

Two of the BOJ's nine board members dissented to the central bank's decision to keep short-term interest rates at 0.5% and proposed, unsuccessfully, to hike borrowing costs to 0.75%.

Following are excerpts from BOJ Governor Kazuo Ueda's comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:


FOOD INFLATION RISKS SEEN, BUT NO MAJOR CONCERN FOR NOW

"Today's CPI data was mostly within our expectations ... We expect food inflation to dissipate and have no big impact on underlying inflation. There is a risk that prolonged rises in food prices could affect inflation expectations, and gradually push up underlying inflation. On the other hand, there's a risk that high food prices could hurt consumption of other goods, and cool consumption overall. Both are not our baseline scenario, but we need to be mindful of such risks."


RATE HIKE DEPENDS ON IMPACT OF US TARIFFS, FOOD INFLATION
"We need to look at the extent to which downside risks from U.S. tariffs on Japan's economy could materialise, as well as whether food inflation will subside."


PROFITS HOLD UP AS TARIFF IMPACT ON JAPAN REMAINS LIMITED
"As for the current quarter, we're seeing some downturn in exports following front-loading in shipments. Manufacturers' profits are falling somewhat. But all in all, exports are moving sideways and corporate profits remain elevated. Capital expenditure is solid. Consumption is somewhat weak but remains resilient. So far, we're not seeing a major impact from U.S. tariffs on Japan's economy."

UEDA FLAGS INFLATION NEARING 2%, CAUTIONS ON TARIFF RISKS

"My personal view is that underlying inflation is still somewhat below 2%, but approaching that level. As for board member Naoki Tamura's view, upside price pressure is of course among risks. But I feel that we also need to be mindful of downside economic and price risks, given the impact from U.S. tariffs will start to intensify."

BOJ SEES MODERATE US TARIFF IMPACT
"The U.S. economy has shown some signs of weakness in jobs and consumption since July. But for now, the pass-through of tariff costs on inflation seems moderate. The Fed's rate cut is likely to underpin the U.S. economy.
"As for Japan's economy, the impact of tariff is weighing on manufacturers' profits. But so far, it is not affecting much Japan's economy as a whole including jobs, wages and capital expenditure. We expect underlying inflation to continue heading toward 2%."

BOJ STICKS TO OUTLOOK

"There's no need to change our baseline scenario shown in our quarterly outlook report in July. Japan's economy may face pressure from tariffs but will likely withstand the hit. We expect underlying inflation to stagnate for some time, but then gradually accelerate toward 2%."

UNCERTAINTY OVER OUTLOOK

"However, there continues to be strong uncertainty over the outlook."

GRADUAL TIGHTENING IF GROWTH, INFLATION STAY ON TRACK

"Real interest rates remain very low. If our economic and price forecasts materialise, we will continue to raise interest rates in accordance to improvements in the economy and prices."

BOJ TO MONITOR TARIFF IMPACT

"There is high uncertainty over the impact of each country's tariff policy. As such, we will scrutinise without any pre-set idea overseas and domestic economic conditions as well as market developments."